The scary truth behind the new jobs numbers

John Crudele

The Federal Reserve is in trouble. And that means we are all in trouble.

You've already had time to digest last Friday's employment report. The government said just 54,000 jobs were created during May, which was a whole lot worse than the 243,000 new positions that allegedly popped up in April.

Neither of those numbers is an accurate representation of what's really going on in the job market.

What happens when the jobs data comes out the first Friday of every month is really nothing more than an exercise in Fun With Government Numbers.

The government's data on the economy is so bad it should be written in crayon, with happy face stickers next to it.

As I've been saying, the employment numbers this spring were destined to get better because the Labor Department -- which creates several pieces of economic data that border on the fictitious -- is very generous with assumptions about new companies that are supposed to be forming when the temperature warms.

And for two months -- March and April -- job growth was well above expectations.

That's what makes the May figure so disturbing. Job growth in May should also have been good.

In order to come up with growth of 54,000 new jobs the Labor Department had to assume the unlikely -- that 206,000 jobs were created by newly-formed companies it thinks but can't prove were "born" in May.

You can find that figure right on the Labor Department Web site at www.bls.gov/web/empsit/cesbd.htm. This is called Labor's Birth/Death Model, and it's the nearest thing to a fraud perpetrated by Washington.

Without this generous assumption, the US would have lost jobs in May, rather than having created a paltry number of them.

President Obama won't fully understand the mess he's in until he realizes how squishy these job figures are. And Labor is doing nothing to correct these false assumptions.

Despite the fact that the economy is clearly slowing, the department this year added 206,000 phony jobs to May; last year's guess was "just" 192,000. And those 192,000 jobs had to eventually be taken out of the annual calculation. So, bottom line: The economy is in bad shape even before talk of possible budget cuts and debt ceilings disrupt it even more.

Congress and the president long ago abdicated their role in helping the economy.

The federal budget deficits, created over the decades, that elected officials of both parties have neutered the government's ability to spend its way out of this recession.

And by keeping interest rates so low for so long the Fed has not only given up most of its power, but it has also stoked inflation.

Which leaves us with the supposed magic elixir that the Fed is selling like some carnival barker: quantitative easing, the printing of extra electronic currency that can float around the financial system.

The Fed has already gone through batches 1 and 2 of this elixir, and it'll only be a matter of days before Wall Street will be crying for another dose.

Quantitative Easing 1 & 2 didn't do much for the economy, as you can see from the unsatisfactory number of jobs created over the past two years. That's especially clear if you look at the job gains after Labor revises them in the months ahead.

But the stock market sure loved the QEs. If this extra money can't find a place in the real economy that creates jobs and expands companies, then it is more than welcome on Wall Street, where speculation leads to bubbles and wealth for the lucky few.

There wasn't much of a outcry for QE3 after last Friday's pathetic jobs report. Spiro Agnew's Silent Majority just doesn't have a voice in the economic debate. But you can be sure of this -- if the stock market continues to decline (and it probably will) Wall Street will be howling for more quantitative juice before long.

Will it come? The temptation will be great because the Fed, as I said, is in trouble and out of ideas. But even Fed Chairman Ben Bernanke, who birthed the idea of QE while pitter-pattering around Princeton, seems reluctant this time.

At his first-ever news conference a few weeks back, Bernanke said the QE dangers are starting to outweigh the benefits.

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Which gets me back to my favorite subject: my idea for fixing the economy.

If Washington wants to stimulate the economy without spending money (which it doesn't have) or reducing interest rates (which can't go any lower) or destroying the value of the dollar and stoking in flation (which Bernanke's QE is doing), then it should try my plan.

Change the rules on retirement accounts so that some small amount of the $15 trillion in these plans can be in vested in real estate.

Let the Americans who can afford to buy real estate in their retirement plans do so.

Give them tax breaks. Encourage them to move into vacant condos in Florida, Arizona, California and everywhere else.

Get these properties off the books of banks and the federal government.

I'll get back to this another time when I have more space. But someone had better come up with a new idea -- and fast.

john.crudele@nypost.com